Tax Deduction Account Number

Tax Deduction Account Number or Tax Collection Account Number is a 10-digit alpha numeric number issued by the Income-tax Department (we will refer to it as TAN). TAN is to be obtained by all persons who are responsible for deducting tax at source (TDS) or who are required to collect tax at source (TCS).

Who must apply for TAN?

All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN.

TAN is required to be quoted in all TDS/TCS returns, all TDS/TCS payment challans and all TDS/TCS certificates to be issued. TDS/TCS returns will not be received if TAN is not quoted and challans for TDS/TCS payments will not be accepted by banks. Failure to apply for TAN or not quoting the same in the specified documents attracts a penalty of Rs. 10,000/-

As discussed above, every person liable to deduct tax at source or collect tax at source is required to obtain TAN. However, a person required to deduct tax under section 194-IA can use PAN in place of TAN as such person is not required to obtain TAN.

Further, a person required to deduct tax under section 194-IB or section 194M shall not be required to obtain tax deduction account number (TAN).

As per section 194-IB any individual or HUF [whose books of account are not required to be audited under section 44AB] is liable to deduct tax at the rate of 5% while making payment of rent of any land or building or both to a resident person if amount of rent exceeds Rs. 50,000 for a month or part of a month.

Section 194M provides for deduction of tax, at the rate of 5%, from the sum paid or credited to a resident, in a year on account of contractual work, commission (not being insurance commission as referred to in Section 194D), brokerage or professional fees, by an individual or a HUF [whose books of account are not required to be audited under Section 44AB], if aggregate of such sum exceeds Rs. 50 lakhs in a year.

Why TAN is required?

As per section 203A of the Income-tax Act, 1961, every person who deducts or collects tax at source has to apply for the allotment of TAN. Section 203A also makes it mandatory to quote TAN in following documents:
(a) TDS statements i.e. return
(b) TCS statements i.e. return
(c) Statement of financial transactions or reportable accounts
(d) Challans for payment of TDS/TCS
(e) TDS/TCS certificates
(f) Other documents as may be prescribed

No documents are required to be submitted along with application for allotment of TAN.

TAN allotted for TDS can be used for the purpose of TCS also. In other words, no separate TAN is required to obtain for the purpose of TCS, if the person already holds TAN for the purpose of TDS.

It is illegal to possess or use more than one TAN. Different branches/ divisions of an entity may, however, have separate TAN.
In case more than one TAN have been allotted, then the TAN which is being used regularly should be continued and the other TAN(s) should immediately be surrendered for cancellation.